Out-Law News 2 min. read
21 Dec 2015, 10:07 am
Although the EU is yet to finalise the revised Markets in Financial Instruments Directive (MiFID II), the FCA's consultation covers those areas in which it already has "sufficient certainty" about the shape of the final rules to propose changes to the regulatory handbook. These relate to the FCA's regulation of the secondary trading of financial instruments, and include issues affecting trading venues, transparency, and algorithmic and high-frequency trading.
Other proposals set out in the consultation include changes to the scope of the application of the FCA's 'Principles for Businesses', and its approach to supervision of the new 'data reporting service providers' category of firms requiring FCA authorisation.
The consultation closes on 8 March and is particularly aimed at investment banks, interdealer brokers, trading venues, investment managers, firms that will fall into the new data reporting service providers category and firms involved in algorithmic and high-frequency trading.
"Some of the points on which we are consulting may be impacted by as yet unpublished EU legislation and guidance, but we think it is helpful to set out our views on these matters at this relatively early stage of the implementation process," the FCA said.
A "significant part" of the new regime will take the form of EU regulations, meaning it will take effect in the UK without the need for changes to domestic laws and regulations. As a "starting point", the FCA does not intend to copy out these directly applicable provisions into its handbook. Instead, it will "simply include a reference to them and update the Reader's Guide accordingly", according to its consultation.
"There will be some exceptions to this, for example when it is necessary to exercise a discretion provided for in the regulation itself," the FCA said.
The UK government and regulators will have some discretion over the implementation of the parts of the new regime which take the form of a directive. Currently, EU member states are due to make the necessary changes to their national laws and regulations by 3 July 2016, ahead of the new rules coming into force on 3 January 2017. However, EU lawmakers are currently discussing whether to postpone this date by one year.
The European Commission has not yet published a formal legislative proposal introducing this delay, the FCA said. Once it has done so, the FCA will take this into account as part of its final implementation plans, it said.
Once in force, MiFID II will revise and update the existing MiFID regime. This came into force on 1 November 2007, with the aim of creating a harmonised regulatory regime for investment services across the European Economic Area (EEA).
The revised regime is designed to take into account developments in the trading environment since the original directive came into force, and also aims to strengthen investor protection and increase market resilience. It will also apply to a broader range of financial instruments, trading venues and techniques; from global investment banks trading complex securities to fund managers, stockbrokers and independent high street financial advisers providing advice to the general public.
The FCA intends to publish at least one additional consultation paper during the first half of next year, setting out its approach to the conduct of business issues and other parts of the new regime which will be based on yet-to-be-published MiFID II implementation measures. The Prudential Regulation Authority (PRA) is also due to consult on the changes that it needs to make to its regulatory rulebook next year.